In a bid to promote solar investment and combat unreliable power supply, the South African government has introduced the Energy Bounce Back Loan Guarantee Scheme (EBB). The scheme, announced in response to President Cyril Ramaphosa’s commitment, will offer loan guarantees for small and medium enterprises (SMEs) and households to invest in solar equipment. The initiative aims to generate additional generation capacity, enhance resilience against power shortages, and facilitate the adoption of cleaner energy solutions.
Under the EBB scheme, the government will assume an initial loss of 20% through a government guarantee, administered by the South African Reserve Bank. This will provide financial institutions with the confidence to offer loans for rooftop solar investments, including solar panels, batteries, inverters, and related installation costs. The EBB operates through three main mechanisms:
- Rooftop Solar Loan Guarantee for SMEs and Households: The scheme facilitates loans to SMEs and households for investments in rooftop solar energy systems, enabling businesses and individuals to transition to cleaner energy sources.
- Rooftop Solar Loan Guarantee for Energy Service Companies (ESCOs): This mechanism supports ESCOs that offer leasing, instalment sale, and power purchase contracts to SMEs and households, allowing them to access reliable and cleaner energy without upfront costs.
- Working Capital Loans for Rooftop Solar Supply Chain: Businesses involved in the rooftop solar supply chain can access working capital loans to meet increased demand and reduce supply delays.
- The Industrial Development Corporation (IDC) will also introduce a separate mechanism to facilitate new ESCO entrants and scale up existing ESCOs through mezzanine finance instruments.
Eligible businesses with a maximum turnover of R300 million, informal traders, and non-bank lenders can participate, subject to compliance with requirements. The scheme will offer loans up to R10 million for businesses and R300,000 per household for rooftop solar purchases. Loans will be capped at the repo rate plus a maximum of 6%, promoting competitive rates among participating banks and finance providers.
The Energy Bounce Back Loan Guarantee Scheme is part of South Africa’s broader strategy to encourage renewable energy adoption, boost economic growth, and mitigate the impact of unreliable power supply. The scheme will be available until 30 August 2024.
By offering financial support for solar investment, the South African government aims to drive sustainable energy adoption, increase energy generation capacity, and enhance resilience to power challenges.
